(Stock Exchange Release)
This announcement is in two parts
- Revenue for 2007: EUR 2,810.2 million (2006: EUR 2,522.5 million),
up 11%.
- Operating profit totaled EUR 143.1 million (193.7). The operating
profit includes write-downs and other non-recurring items, with their
net effect on operating profit amounting to EUR -31.5 million
(+23.2).
- Operating profit, excluding non-recurring items: EUR 174.6 million
(170.5).
- Earnings per share: EUR 0.53 (EUR 0.90).
- The proposed dividend is EUR 0.50 per share (0.48), up 4%.
- Strategy review initiated to enhance the Group's profitability and
to ensure future growth.
OCTOBER-DECEMBER AND FULL-YEAR KEY FIGURES IN 2007
EUR million 10-12/2007 10-12/2006** Change 1-12/2007 1-12/2006** Change
% %
REVENUE 654.4 669.5 -2 2,810.2 2,522.5 11
EBITDA 31.4 63.2 -50 316.9 317.2 0
EBITDA, % 4.8% 9.4% 11.3% 12.6%
OPERATING -42.9 21.6 -299 143.1 193.7 -26
PROFIT
Operating -6.6% 3.2% 5.1% 7.7%
profit, %
Operating
profit,
excluding
non-recurring
items 4.1 28.6 -86 174.6 170.5 2
Operating
profit,
excluding
non-recurring
items, % 0.6% 4.3% 6.2% 6.8%
Financial
income and
expenses -15.3 -12.7 -51.6 -37.2
PROFIT BEFORE -58.0 7.8 93.6 154.2
TAX
Profit before -8.8% 1.2% 3.3% 6.1%
tax, %
NET PROFIT -46.0 7.7 61.0 112.2
EPS, EUR -0.39 0.06 0.53 0.90
EPS, EUR,
excluding
write downs -0.04 0.06 0.87 0.90
Capital 2,035.8 1,876.6 2,035.8 1,876.6
employed *
ROCE, % * 7.1% 10.2% 7.1% 10.2%
Cash flow
after
investments,
excluding
acquisitions -6.3 79.5 -82.5 155.0
Personnel at 10,007 9,327 10,007 9,327
period-end
* 12-month rolling average
** Prior year correction included (see page 15)
REVENUE AND OPERATING PROFIT FOR OCTOBER-DECEMBER AND FULL-YEAR 2007
In October-December 2007, Kemira Group's revenue totaled EUR
654.4 million (October-December 2006: EUR 669.5 million). This fall
in revenue was due in particular to the weakened US dollar and
underperforming sales in the Kemira Specialty business area compared
to previous year. The currency effect lowered revenue by
approximately EUR 18 million or 3%. Acquisitions pushed revenue up by
EUR 13 million, while divestments decreased it by EUR 5 million.
In the October-December period, the Group's operating loss totaled
EUR 42.9 million (operating profit EUR 21.6 million). Within the
framework of a strategic review currently being conducted by the
Group, decisions were made on measures leading to write-downs
totaling EUR 47.1 million for the last quarter. These write-downs
concern Kemira's business operations in Chemidet, its water treatment
operations in Denmark, its hydrogen peroxide operations in the
Netherlands and its operations in the United States as well as an
investment in a Group-wide enterprise resource planning system. The
operating loss also includes other non-recurring items whose net
effect amounted to EUR +0.1 million (-7.0). Excluding write-downs and
other non-recurring items, operating profit totaled EUR 4.1 million
(28.6). The decrease in operating profit was particularly due, in
addition to the write-downs, to high year-end raw material and energy
prices, the weakened US dollar, a delay in starting up the Uruguay
plant, strikes in the Pigments business unit, non-recurring expenses
related to staff reductions and fixed cost increases. Operating
profit as a percentage of revenue, excluding non-recurring items,
decreased from 4.3 % to 0.6 %.
Kemira Group's revenue for 2007 rose by 11% over the previous year,
to EUR 2,810.2 million (2,522.5). Acquisitions accounted for
EUR 314.9 million of revenue growth, while divestments eroded revenue
by EUR 26.9 million. Organic growth in local currencies was 2%. The
currency effect decreased revenue by 2% or EUR 54 million.
Revenue by market area was as follows: Europe 67%, North America 23%,
South America 4%, Asia 5% and Others 1%.
Kemira's operating profit for 2007 decreased by 26%, to
EUR 143.1 million (193.7) and includes write-downs and other
non-recurring items, whose net effect amounts to EUR -31.5 million
(+23.2). Based on a strategic review, decisions were made on measures
leading to write-downs totaling EUR 47.1 million for the last
quarter. Excluding non-recurring items, operating profit came to
EUR 174.6 million (170.5), representing growth of 2%. Acquisitions
contributed EUR 13.7 million to operating profit, while divestments
depressed operating profit by EUR 2.4 million. Operating profit as a
percentage of revenue, excluding non-recurring items, decreased from
6.8% to 6.2 %. The weakened US dollar had a negative effect on both
revenue and operating profit, and the currency effect decreased
operating profit by approximately EUR -10 million.
Revenue by business area:
EUR million 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Kemira Pulp&Paper 249.8 264.0 1,018.3 993.3
Kemira Water 188.0 171.5 730.5 467.6
Kemira Specialty 102.0 117.2 425.9 456.2
Kemira Coatings 118.4 109.3 625.2 562.8
Other, including -3.8 7.5 10.3 42.6
eliminations
Total 654.4 669.5 2,810.2 2,522.5
Operating profit by business area:
EUR million 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Kemira Pulp&Paper -3.2 20.1 66.8 90.8
Kemira Water 5.2 10.3 45.0 35.3
Kemira Specialty -13.9 11.1 13.5 45.8
Kemira Coatings -5.9 -1.5 73.1 72.1
Other -25.1 -18.4 -55.2 -50.3
Total -42.9 21.6 143.1 193.7
Non-recurring items included in operating profit:
EUR million 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Kemira Pulp&Paper -14.1 0.4 -11.6 11.0
Kemira Water -3.1 -0.5 -3.1 -0.2
Kemira Specialty -11.9 1.5 -10.6 3.6
Kemira Coatings -2.4 - 8.8 16.4
Other -15.5 -8.4 -15.0 -7.6
Total -47.0 -7.0 -31.5 23.2
October-December perating profit excluding write-downs and other
non-recurring items:
EUR million 10-12/2007 10-12/2006 10-12/2007 10-12/2006
Kemira Pulp&Paper 10.9 19.7 4.3% 7.5%
Kemira Water 8.3 10.8 4.4% 6.3%
Kemira Specialty -2.0 9.6 -2.0% 8.2%
Kemira Coatings -3.5 -1.5 -3.0% -1.4%
Other -9.6 -10.0
Total 4.1 28.6 0.6% 4.3%
Full-year 2007 operating profit excluding write-downs and other
non-recurring items:
EUR million 1-12/2007 1-12/2006 1-12/2007 1-12/2006
Kemira Pulp&Paper 78.4 79.8 7.7% 8.0%
Kemira Water 48.1 35.5 6.6% 7.6%
Kemira Specialty 24.1 42.2 5.7% 9.3%
Kemira Coatings 64.3 55.7 10.3% 9.9%
Other -40.2 -42.7
Total 174.6 170.5 6.2% 6.8%
In October-December net financial expenses grew to EUR 15.3 million
(12.7), due to increases in loans raised and higher market interest
rates. The loss before tax came to EUR 58.0 million (profit before
tax EUR 7.8 million) and the net loss for the period totaled
EUR 46.0 million (net profit EUR 7.7 million). Loss per share totaled
EUR 0.39 (+0.06).
In 2007 profit before tax amounted to EUR 93.3 million (154.2) and
net profit totaled EUR 67.5 million (112.2). Earnings per share were
EUR 0.53 (EUR 0.90).
Current tax came to EUR 25.8 million (42.0), representing an
effective tax rate of 27.7%. The effective tax rate was lower than
with current tax rate due to the utilization of tax losses and
non-taxable gains on assets sold. On the other hand write down of
assets increased the effective tax rate.
The company's 2006 Financial Statements and interim reports for 2007
projected an increase in revenue, operating profit and earnings per
share on 2006. However, due to an underperforming last quarter and
non-recurring items, only revenue showed growth on the previous
year's levels. The Group's financial targets for 2007 were a minimum
of 5% organic growth in revenue, a minimum of 10% growth in earnings
per share and continuous improvement in return on capital employed.
The shortfall in meeting the defined targets was particularly due to
weak performance of Kemira Specialty, the weakened US dollar and
non-recurring items.
CAPITAL EXPENDITURE
Gross capital expenditure, excluding acquisitions, totaled EUR 254.4
million (164.7) in 2007.
The largest investments involved a chemical plant constructed at the
site of a pulp mill in Uruguay, for EUR 43.1 million; a paint factory
constructed in the Stockholm area, for EUR 12.4 million; the
deployment of a new Group-wide enterprise resource planning system,
for EUR 23.3 million; and an environment-related capital investment
in Pori, for EUR 17.2 million. Maintenance investments represented
some 26% of capital expenditure excluding acquisitions.
The Group recorded EUR 173.8 million (123.5) in depreciation,
including EUR 37.9 million as write-downs.
Gross capital expenditure, including acquisitions worth
EUR 66.6 million (297.3), totaled EUR 321.0 million (462.0). Cash
flow from the sale of assets, including the repayment of Kemapco
loans, was EUR 0.2 million in the negative (proceeds of
EUR 102.8 million). The Group's net capital expenditure totaled EUR
321.2 million (359.1).
FINANCIAL POSITION AND CASH FLOWS
The Group maintained a good financial position and liquidity
throughout the financial year.
In 2007, the Group reported cash flows of EUR 172.1 million (216.8)
from operating activities and showed a negative free cash flow of EUR
149.1 million (-142.3). Net working capital was 15.2% (15.0%) of
revenue. Kemira Oyj paid out EUR 58.2 million (43.6) in dividends to
its shareholders. On December 31, 2007, the Group's net liabilities
stood at EUR 1,003.4 million (827.4).
Interest-bearing liabilities totaled EUR 1,056.1 million. The
duration of the Group's interest-bearing loan portfolio at the
year-end was 13 months (16).
Equity ratio stood at 39% (December 31, 2006: 39%), while gearing was
92% (December 31, 2006: 76%).
Net financial expenses increased to EUR 51.9 million (37.2), due to
increases in loans raised and higher market interest rates. The
Group's net financing cost was 5.2%.
Cash and cash equivalents on December 31, 2007 totaled
EUR 52.6 million. The unused amount of the revolving credit facility,
falling due in 2012, totaled EUR 583.3 million.
In October of 2006, Kemira signed a credit facility enabling six
Group companies to sell certain account receivables to a finance
company. The related credit risk transfers to the finance company and
the receivables are derecognized from the Group companies' balance
sheet. The amount of outstanding sold receivables on
December 31, 2007, was EUR 23.7 million (15.7).
The Group's most important exchange rate risk arises from USD
denominated exports from the euro area. Approximately 75% of the
exchange rate risk, equivalent annually to EUR 50 million, due to
exposure to the US dollar, was hedged during the year. In addition to
exchange rate risk, Kemira Pigments Oy's euro denominated sales are
also indirectly exposed to the US dollar, since the world market
pricing of titanium dioxide is based on the US dollar. In addition,
the Group is exposed to a USD risk when USD denominated items are
converted into euro in the financial statements.
RISK MANAGEMENT
Kemira's risk management, based on the principle of Enterprise Risk
Management (ERM), refers to the systematic and proactive
identification, assessment and management of various risk categories,
such as strategic, operational, hazard and financial risks.
Various Group guidelines and policies specify management objectives,
the division of responsibilities and risk limits. Risk ownership
remains with the business or function owner, which also assumes
responsibility for the related risk management. While the Group's
Risk Management function has the role of developing and coordinating
risk management and risk management networks within the Group,
Kemira's Internal Audit is in charge of assessing the Risk Management
function and its measures.
Kemira performs risk identification and assessment by business area,
applying a jointly agreed risk self-assessment methodology. Risk
reporting by business area can also be supplemented by identifying
and assessing risks associated with, for example, various support
functions, major manufacturing plants or investment projects. Risk
management action plans based on risk assessments are integrated as
part of business action plans, by business area.
In order to reap cost benefits and ensure sufficient Group-level
control, Kemira manages certain risk management activities on a
centralized basis, including the purchase of insurance cover for
certain risks, such as general third party and product liability,
cargo, property and business interruption insurance for major
production sites, as well as the hedging of treasury risks. The Group
also manages industrial and business environment, customer and
technological intelligence processes on a centralized basis.
Kemira's major strategic and operative risks are associated, for
example, with acquisitions, their integration, changes in the
industry, human resources, product development, sourcing and
competition.
RESEARCH AND DEVELOPMENT
Due to the acquisitions conducted over the previous year, operations
expanded markedly. Research and development expenditure totaled
EUR 65.9 million (55.1), accounting for 2.3% (2.2%) of revenue. At
the end of the year, the number of R&D personnel in a total of 10
countries was 730, with 60% working in Finland. The R&D organization
consists of local customer service points and business area specific
technology centers involved in more demanding development work, while
advanced research is conducted in the Group's research centers
located in Finland and managed on a centralized basis. The majority
of research costs are borne by business areas, with Group financing
supporting more risky long-term research and the utilization of
synergies. An innovation contest opened during the year nearly
quadrupled the number of inventions on the previous year.
ENVIRONMENT AND SAFETY
The bulk of Kemira's business is in the chemical industry, whose
products and operations are governed by numerous international
agreements and regional and national legislation all over the world.
The Group treats its environmental liabilities and risks in its
financial statements in accordance with IFRS. The Kemira Code of
Conduct contains up-to-date environmental and health and safety
guidelines, compliance with law setting the minimum requirement.
Management is not aware of any significant non-compliance conditions
with respect to environmental and safety permits.
In 2007, capital expenditure on environmental protection at company
sites totaled EUR 30.2 million (12.2) and operating costs
EUR 39.1 million (35.4). Capital expenditure of aroundEUR 17.2 million on the management of the by-products in the Pori
titanium dioxide plant represented the most significant single
investment project carried out in 2007. In addition to developing new
business, the investment also contributes to complying with the
requirements set by the environmental permit valid from the end of
the year and allows the termination of the stock piling of
by-products on the site.
Provisions for environmental remediation measures, EUR 13.6 million
(16.8), are mainly related to landfill closures and remediation
projects for contaminated soil. The decline in provisions was mainly
due to the progress of remediation measures performed, for instance,
at the Kokkola site. Management is not aware of any environmental
liability cases related to previous operations, which would have any
significant effect on Kemira's financial position.
Corporate acquisitions and divestments did not alter the Group's
overall environmental liabilities significantly. Regarding two of the
sites of the water chemicals business acquired from Cytec Inc.,
settlements concerning the division of the environmental liabilities
observed in analyses are underway in accordance with the acquisition
agreement.
The new EU chemicals legislation (REACH) entered into force on
1 June 2007. Registration, testing and risk assessment now required
by the legislation increase the costs of chemical substances produced
in and imported to the EU. Kemira manufactures within, or imports to,
the EU area approximately 250 substances subject to registration and,
additionally, about ten substances are subject to authorization. The
Group has initiated the preparation of pre-registration and other
measures required by the regulatory framework, under the guidance of
the Kemira REACH Competence Center established in Finland. The
implementation of REACH is not expected to have any major effects on
the Group's competitiveness.
The frequency of occupational accidents increased slightly on the
previous year, to 6.5 (6.0) accidents per million working hours, but
no major industrial accidents accompanied by serious personal
injuries or environmental damage occurred in 2007.
Kemira publishes an annual Environmental Report verified by a third
party and prepared in accordance with IFRS and the guidelines issued
by the European Chemical Industry Council (CEFIC). The report deals,
for example, with emissions and effluents, waste, environmental
costs, safety and product safety as well as the use of natural
resources.
HUMAN RESOURCES
The number of Group employees totaled 10,007 on December 31, 2007
(December 31, 2006: 9,327), while the average payroll numbered 10,008
employees (9,186) in 2007. This growth in staff numbers came from
corporate acquisitions carried out during the financial year.
The year-end number of employees in Finland, elsewhere in Europe, the
Americas and Asia came to 2,885 (3,020), 4,930 (4,506), 1,709 (1,514)
and 483 (287), respectively. On average Kemira Pulp&Paper had 2,315
employees (2,285) on its payroll, Kemira Water 2,189 (1,596), Kemira
Specialty 1,066 (1,102), Kemira Coatings 3,883 (3,541) and Group
functions 555 (662).
Salaries and wages for 2007 totaled EUR 360.4 million (326.2). Pay is
determined by national collective and individual agreements, personal
performance and job content. In the context of job evaluation, Kemira
applies systems in global use, enabling the Group to ensure fair pay,
which is competitive in the market, and provide a framework for
employee performance appraisal. Basic pay is supplemented by
performance-based bonus schemes, which cover a large share of Group
employees.
Kemira conducts a Group-wide employee opinion survey every year, with
a view to evaluating developments in leadership work and the
workplace climate. The survey assesses job satisfaction and
satisfaction with working conditions, leadership, communication,
supervisory/managerial performance and performance on unit and Group
level. Its results are compared with those of previous surveys and
the corresponding surveys conducted in the industry, and are used as
the basis of various development projects. With the response rate at
87% in 2007, the survey's results exceeded the global comparison
index and showed a year-on-year improvement in job satisfaction. In
particular, the leadership, communication and employee reward system
scored better than a year ago. However, work was perceived as
somewhat more stressful than a year earlier. Kemira emphasizes the
importance of handling survey results on a local basis and the entire
staff's involvement in analyzing results and planning and
implementing any remedies.
The Kemira Code of Conduct specifies Group principles governing
equality. Accordingly, Kemira treats all people equally in
recruitment and working conditions, irrespective of race, gender,
religious beliefs, political opinions and national and social origin.
Kemira aims to achieve equal numbers of applications for vacancies by
women and men, equal opportunities for competence development and
career progression, equal placement on various organizational levels,
equal pay for equal work and equality in other employment terms and
conditions. On December 31, 2007, women accounted for 29% (29%) of
Group employees and men 71% (71%).
The human resources strategy aims to promote a participative and
entrepreneurial culture. The culture module of the Group-wide
development program, Kemira - from Good to Great, defines the
following action areas for strategy implementation: leadership
skills, competence, employee involvement, rewarding, resources,
safety and wellbeing programs. HR development tools - employee
opinion surveys, performance reviews and the 360-degree feedback
method - form the basis for HR action planning, with particular
attention being paid to the reward system's competitive and
motivational aspects. Leadership and personal development also
represent an important area. Greater employee empowerment, resource
plans based on business strategies and the qualitative elements of
employment - such as the diversity of duties, opportunities for
employees to have their say in the workplace, others' support and
employee wellbeing issues - are among the key areas in HR
development. Supervisors/managers monitor and measure these success
factors in cooperation with HR professionals.
KEMIRA PULP&PAPER
Kemira Pulp&Paper - the leading global expert in pulp and paper
chemistry, its energy and cost-efficient solutions spanning the pulp
and paper industry's value chain from pulping to paper coating.
EUR million 2007 2006 Change %
REVENUE 1,018.3 993.3 3
EBITDA 132.0 137.1 -4
EBITDA, % 13.0% 13.8%
OPERATING PROFIT 66.8 90.8 -26
Operating profit, % 6.6% 9.1%
Operating profit, excluding non-recurring
items 78.4 79.8 -2
Operating profit, excluding non-recurring
items, % 7.7% 8.0%
Capital employed * 800.3 819.5
ROCE, % * 8.3% 11.0%
Capital expenditure, excluding acquisitions 78.4 77.6
Cash flow after investments, excluding
acquisitions -25.2 65.1
Personnel at period-end 2,285 2,304
* 12-month rolling average
Kemira Pulp&Paper revenue for October-December 2007 was
EUR 249.8 million (264.0). The downturn in revenue was caused, in
particular, by the weakened US dollar and reduced volumes compared to
the previous year. The currency effect had an approximately 3%
negative impact on revenue.
Kemira Pulp&Paper reported for the last quarter an operating loss of
EUR 3.2 million (operating profit of EUR 20.1 million) in 2007.
During the quarter, write-downs of EUR 17.1 million were recorded
pertaining to the restructuring of the Dutch hydrogen peroxide
business and the US business operations. In addition to non-recurring
items, operating profit was lowered by the weakened US dollar, the
delay in starting the Uruguay plant, smaller volumes, high energy
prices and increased fixed costs. Excluding write-downs and other
non-recurring items, operating profit totaled EUR 10.9 million
(19.7).
Kemira Pulp&Paper's revenue for the full-year 2007 grew by 3%, to
EUR 1018.3 million (993.3). Acquisitions pushed revenue up by
approximately EUR 50 million, while divestments depressed it by
around EUR 12 million. Organic growth in local currencies was 2%. The
effect of currencies, particularly of the US dollar, decreased
revenue by some EUR 26 million or 3%.
The operating profit for 2007 decreased to EUR 66.8 million (90.8)
due, in particular, to write-downs of EUR 17.1 million carried out
during the last quarter. In addition, operating profit includes
EUR 5.5 million in other non-recurring income. Net effect of all
non-recurring items was EUR -11.6 million. Operating profit excluding
all non-recurring items declined by 2%, to EUR 78.4 million
(EUR 79.8 million). The weakened US dollar had a negative effect on
both revenue and operating profit, which was also burdened by the
delayed start up of the Uruguay chemical plant. Operating profit
excluding non-recurring items stood at 7.7% (8.0%).
In June, Kemira announced its intent to increase production of
calcium sulfate pigment, used as paper pigment by 25,000 tons to
175,000 tons. The value of the investment amounts to approximately
EUR 5 million. Kemira's paper pigment production plants are located
in Siilinjärvi, Finland. The related calcium sulfate technology has
been developed and productized by Kemira in cooperation with the
Finnish forest industry and related research communities. Calcium
sulfate pigment is used as a filler and coating pigment for paper and
cardboard.
In August, Finnish Chemicals Oy, a subsidiary of the Kemira Group,
received an EU Commission Statement of Objections concerning the
selling of sodium chlorate, with regard to alleged antitrust
activities during 1994-2000. Kemira Oyj acquired Finnish Chemicals Oy
in 2005. Finnish Chemicals has submitted its reply to the Statement
of Objections.
In December, Kemira sold its 50% ownership in a Japanese hydrogen
peroxide joint venture company Kemira-Ube Ltd to the other joint
venture partner Ube Industries Ltd. Kemira-Ube's net sales total
approximately EUR 20 million. Kemira aims to reinforce its services
for Japanese pulp and paper chemical customers and is focusing its
growing business in Japan on the fully owned Kemira Japan KK.
In autumn, the construction of a chemical plant in Fray Bentos,
Uruguay, next to Botnia's pulp mill, was completed. Kemira's chemical
plant began operating in November, once the pulp mill had obtained an
authorization to begin production some months behind the planned
schedule.
Kemira's new Asian Technology Center for the pulp and paper industry
began operating in Shanghai during the autumn. This new center is an
important link in Kemira's R&D network that now serves customers
globally. In addition to the Asian Technology Center, Kemira's R&D
network already covers Europe and America. Kemira Pulp&Paper is
ramping up its R&D operations in Asia, especially in China, in order
to serve its customers efficiently by providing solutions for local
needs.
In January 2008, Jyrki Mäki-Kala began his duties as President of
Kemira Pulp&Paper, as Harri Kerminen became the CEO of Kemira Oyj.
KEMIRA WATER
Kemira Water - a leading global expert in municipal and industrial
wastewater treatment and process and drinking water treatment. Kemira
Water provides products, equipment and services for municipal and
industrial water treatment.
EUR million 2007 2006 Change %
REVENUE 730.5 467.6 56
EBITDA 80.5 53.4 51
EBITDA, % 11.0% 11.4%
OPERATING PROFIT 45.0 35.3 27
Operating profit, % 6.2% 7.5%
Operating profit, excluding non-recurring items 48.1 35.5 35
Operating profit, excluding non-recurring items,
% 6.6% 7.6%
Capital employed * 442.8 269.2
ROCE, % * 10.3% 13.4%
Capital expenditure, excluding acquisitions 51.0 19.4
Cash flow after investments, excluding
acquisitions -10.7 26.7
Personnel at period-end 2,384 1,846
* 12-month rolling average
Kemira Water's revenue for October-December 2007 improved by 10%,
year on year, to EUR 188.0 million (171.5). The business area's
organic growth in local currencies was 11%.
Operating profit was EUR 5.2 million (10.3) in the last quarter. A
write-down of EUR 5.8 million was recorded during the quarter,
pertaining to the restructuring of the Danish water treatment
chemicals business and the US business operations. Excluding
write-downs and other non-recurring items, operating profit totaled
EUR 8.3 million (10.8).
For the full-year 2007, Kemira Water's revenue increased by 56%, to
EUR 730.5 million (467.6), particularly due to the acquisition of
Cytec's water treatment business in October 2006. Acquisitions
accounted for EUR 242.3 million of revenue growth. Demand for
Kemira's water treatment chemicals and solutions remained healthy in
all market areas. Organic growth in local currencies was 8%.
Furthermore, the currency effect had a 4 % negative impact on
revenue.
Operating profit for the year stood at EUR 45.0 million (35.3),
including non-recurring items whose net effect amounted to
EUR -3.1 million (-0.2). During the last quarter of 2007, a
write-down of EUR 5.8 million was recorded pertaining to the
restructuring of a subsidiary acquired in Denmark and the water
treatment chemicals business in the USA. Operating profit excluding
non-recurring items totaled EUR 48.1 million (35.5). Operating profitas a percentage of revenue, excluding non-recurring items, decreased
from 7.6% to 6.6% due to consolidation of Cytec water treatment
business, which had initially a lower profitability.
The second phase of Cytec's water treatment and acrylamide business
acquisition by Kemira was confirmed in January. The first phase,
which closed in October 2006, included all product lines with the
exception of the Botlek site and certain assets of various
subsidiaries in Asia/Pacific and Latin America. The second phase
completed the transfer of the Botlek site located in the Netherlands.
The aggregate purchase price totaled around EUR 199 million,
including the second and last phase purchase prices and the
associated costs.
In April, Kemira bought an 80% shareholding in Chongqing Lanjie Tap
Water Materials Co., Ltd. This company is a producer of inorganic
coagulants and organic polymers for water treatment in the
municipality of Chongqing in central China. Its main client base
resides in local potable water production. The company's current
revenue, in the range of EUR two million annually, is expected to
grow rapidly in the years to come.
The acquisition of two companies owned by the Brazilian company
Dalquim Industria e Comercio Ltda was completed in April. With a
combined annual revenue of around EUR 12 million, these companies
manufacture inorganic water treatment coagulants and their main
customers include the paper industry and municipalities. In addition
to serving the paper industry's growing needs, the acquirees focus on
the treatment of municipal drinking and wastewater in the southern
states of Brazil. This acquisition will bolster Kemira's goal of
intensifying mutual synergy and strengthening its position as the
world's leading supplier of pulp, paper and water treatment chemicals
in emerging markets.
In the beginning of October, Kemira announced it had agreed to
acquire Nheel Química Ltda, Brazil's leading water treatment
chemicals company. With this acquisition, Kemira will strengthen its
position in the Brazilian and Latin American water treatment market.
Nheel Química's production plant is located in Rio Claro, Sao Paulo
state. The plant produces the full range of coagulants, which are
mainly used for the treatment of drinking water and wastewater.
In 2006, Nheel Química's revenue was around EUR 24 million. This
acquisition fits well with Kemira's strategy to enhance its position
in fast growing emerging markets. Anti-trust approval and the
fulfillment of other terms and conditions are required to close the
deal.
In the beginning of October, the Finnish city of Oulu introduced a
sludge treatment solution based on Kemira's Kemicond concept.
Kemicond is a patented sludge treatment solution developed by Kemira.
This solution enables considerable reductions in sludge volume,
generating significant cost savings for Kemira's customers.
The acquisition of Arkema's coagulant business for water treatment,
agreed in the spring, was realized in December. In 2006, the revenue
of Arkema's coagulant business for water treatment totaled
approximately EUR 19 million. Through this acquisition, Kemira has
become the market leader in inorganic coagulants in France and has
further reinforced its leading position in Spain. The transaction was
confirmed at the beginning of December.
KEMIRA SPECIALTY
Kemira Specialty - the leading expert in specialty chemicals in
selected customer segments, serving customers in a wide array of
industries, such as the paints, cosmetics, packaging inks, feed and
food industries, through its customer-driven solutions.
EUR million 2007 2006 Change %
REVENUE 425.9 456.2 -7
EBITDA 45.1 77.0 -41
EBITDA, % 10.6% 16.9%
OPERATING PROFIT 13.5 45.8 -71
Operating profit, % 3.2% 10.0%
Operating profit, excluding non-recurring items 24.1 42.2 -43
Operating profit, excluding non-recurring items,
% 5.7% 9.3%
Capital employed * 435.3 451.6
ROCE, % * 3.1% 10.1%
Capital expenditure, excluding acquisitions 55.0 30.8
Cash flow after investments, excluding
acquisitions -19.7 53.6
Personnel at period-end 1,028 1,011
* 12-month rolling average
Kemira Specialty's revenue for October-December 2007 fell to
EUR 102.0 million (117.2), due to lower volumes in ChemSolutions
business unit, the continuously fierce competition in the titanium
dioxide market and markedly lower sales prices for titanium dioxide
in comparison to the previous year. In addition, strikes in the Pori
titanium dioxide plant had a negative impact on sales volumes.
Kemira Specialty reported for the last quarter an operating loss of
EUR 13.9 million (operating profit of EUR 11.1 million). This
operating loss includes EUR 11.9 million in non-recurring losses,
inclusive of a write-down of EUR 9.2 million relating to the
restructuring of the Chemidet business unit, compared to
EUR +1.5 million in October-December 2006. In addition to the
write-down, operating loss was due to lower volumes in ChemSolutions
business unit, strikes in the Pigments business units, non-recurring
expenses related to staff reductions and continuing fierce
competition in the titanium dioxide market.
Kemira Specialty's revenue for 2007 decreased by 7%, to
EUR 425.9 million (456.2), due to lower volumes in ChemSolutions
business unit, continuously fierce competition in the titanium
dioxide market and the clearly lower average sales price for titanium
dioxide than in the previous year. Due to development of the US
housing market, American companies have increased their exports of
titanium dioxide to Europe, which has intensified price competition.
In addition, the weakening US dollar has further improved the
competitive position of American companies in Europe. Furthermore,
the currency effect had a 2% negative impact on revenue.
Operating profit for the full-year came to EUR 13.5 million (45.8),
including non-recurring items whose net effect amounted to
EUR -10.6 million (+3.6). During the last quarter, a write-down of
EUR 9.2 million was recorded pertaining to the Chemidet business
unit. Operating profit excluding non-recurring items totaled
EUR 24.1 million (42.2). This drop in operating profit was due in
particular to lower sales volumes in the ChemSolutions and the
Chemidet business units, lower sales prices of titanium dioxide, the
weak US dollar and strikes in titanium dioxide production.
In March, Kemira acquired Sustainable Nutrition B.V. in the
Netherlands from the company's management. Kemira and the acquiree
have collaborated in previous years, when Sustainable Nutrition
operated as Kemira's sales, marketing and product development partner
in the feed industry. The acquisition has strengthened Kemira's
customer knowledge, particularly in the European feed market.
In April, Kemira concluded an agreement on acquiring all holdings in
the privately owned North American company TRI-K Industries Inc. The
transaction also includes Maybrook Inc., a wholly owned subsidiary of
TRI-K. TRI-K Industries Inc. is a distributor and producer of
specialty ingredients for the cosmetics and personal care markets.
Headquartered in New Jersey, US, with additional operations in
Massachusetts, TRI-K currently employs 50 people and recorded
consolidated revenue of approximately USD 20 million in 2006. This
acquisition has expanded Kemira Specialty's offering in the cosmetics
business, especially in the field of skin and health care.
In May, Kemira announced the initiation of a process to evaluate
ownership alternatives for its business units Pigments and Chemidet.
Kemira Pigments produces titanium dioxide pigments in Pori, Finland,
and operates a technology center in Germany and the above-mentioned
North American cosmetics industry company TRI-K Industries. Kemira
Pigments focuses on specialty product markets such as the flexible
packaging and cosmetics industries, where it holds leading market
positions. Pigments' revenue in 2006 totaled EUR 230 million.
Chemidet produces sodium percarbonate for the detergent industry, in
Helsingborg, Sweden, its revenue being EUR 54 million in 2006.
The evaluation of ownership alternatives for Pigments was concluded
in August, entailing no changes in shareholdings. The preliminary
outcome of the evaluation process showed that the market value of the
Pigments business unit in the current business and financial
environment did not correspond to the expected future value of the
business. A decision was therefore taken to halt the evaluation
process and concentrate on improving the profitability and cash flow
of Pigments. With respect to the Chemidet business unit, the process
of assessing different ownership alternatives is continuing.
In July, Kemira announced that it would increase its production
capacity of calcium propionate used for the feed and food industries
by establishing a production site in China. The investment also
includes production capacity for feed additive mixtures.
In the beginning of October, Kemira's subsidiary Kemira Pigments Oy
announced that it had initiated negotiations under the Finnish Act on
Cooperation within Undertakings with its personnel. The company is
pursuing annual savings of around EUR 4.5 million. The objective is
to generate these savings through structural reorganization and
operational efficiency enhancement. These negotiations concluded in
the reduction of 56 employees from the site's organization. The Pori
plant currently employs approximately 650 staff in Finland.
In January, Kemira Pigments Oy's Pori titanium dioxide plant obtained
a new environmental permit. This permit applies to the continuation
of the plant's present operations by raising its capacity from
120,000 tons of pigment to 150,000 tons per year. The permit also
applies to increasing the production of sulfuric acid needed by the
plant, the utilization of its iron sulfate by-product, the closing of
the piling areas for iron sulfate and ilmenite residue located within
the plant site, and work on their surface isolation. Part of the iron
sulfate, which is formed as a by-product of titanium dioxide
production, and which amounts to about 500,000 tons per year, was
previously piled on the site. Now it is sold entirely, to be used as
a water treatment chemical or in the production of such chemicals.
KEMIRA COATINGS
Kemira Coatings - the leading regional expert in painting and coating
solutions in Northern and Eastern Europe, offering services and
branded products to consumers, professionals and industry.
EUR million 2007 2006 Change %
REVENUE 625.2 562.8 11
EBITDA 91.2 88.9 3
EBITDA, % 14.6% 15.8%
OPERATING PROFIT 73.1 72.1 1
Operating profit, % 11.7% 12.8%
Operating profit, excluding non-recurring items 64.3 55.7 15
Operating profit, excluding non-recurring items,
% 10.3% 9.9%
Capital employed * 311.0 310.5
ROCE, % * 23.9% 23.7%
Capital expenditure, excluding acquisitions 43.5 22.5
Cash flow after investments, excluding
acquisitions 26.0 71.2
Personnel at period-end 3,789 3,494
* 12-month rolling average
Kemira Coatings' revenue for October-December 2007 rose by 8%, to
EUR 118.4 million (109.3), Organic growth was 6 %.
The last quarter showed an operating loss of EUR 5.9 million
(operating loss of EUR 1.5 million), including EUR 2.4 million in
non-recurring costs. Due to seasonal variations, the fourth quarter
is generally the weakest for Paints & Coatings.
Kemira Coatings' revenue for the full-year 2007 increased by 11%, to
EUR 625.2 million (562.8). Indeed, sales development was favorable in
all market areas, particularly in Russia and other CIS countries.
Organic growth was 9%. Revenue was further boosted by the acquisition
of two Russian industrial coating companies completed in April 2007,
and the launch of the operations of the Beijing-based sales company
in June.
Operating profit for 2007 stood at EUR 73.1 million (72.1), including
non-recurring items whose net effect amounted to EUR +8.8 million
(+16.4). Excluding the effect of non-recurring items, operating
profit increased by 15% to EUR 64.3 million (55.7). Operating profit
as a percentage of revenue, excluding non-recurring items, rose from
9.9% to 10.3%.
April saw the completion of the acquisition of two Russian industrial
coatings companies. Accordingly, Tikkurila bought 70% holdings in OOO"Gamma" and OOO "Ohtinski zavod poroshkovyh krasok" based in St
Petersburg. With revenue of roughly EUR 8 million and a staff of 110,
Gamma is a major manufacturer of metal-industry coatings in Russia.
Ohtinski zavod poroshkovyh krasok, a manufacturer and marketer of
powder coatings, has revenue of approximately EUR 3 million and a
staff of 50. This acquisition will strengthen Kemira's position in
the Russian metal-industry coatings market.
In May, Kemira Coatings established a new sales company in China.
Tikkurila (Beijing) Paints Co., Ltd began operating on May 22, 2007,
in Beijing. At the same time, Tikkurila acquired the sales company
CEIEC-Feelings, operating in China. CEIEC-Feelings' business
operations and its staff of 50 persons have been transferred to the
new company. CEIEC-Feelings has been operating since 2002 as the
importer of Tikkurila's decorative paints to China and its revenue
for 2007 is estimated at approximately EUR 2 million. The completed
acquisition is aimed at consolidating a basis for the development of
Kemira's market position in the rapidly growing decorative paints
market in China.
In August, Kemira announced that it was pursuing its strategy and
strengthening its position in the Russian coatings markets. Kemira
Coatings (Tikkurila) decided to build a logistics and customer
service center in Moscow, in order to be able to respond to the
challenges presented by powerful growth and demand. The value of the
investment is approximately EUR 20 million. The center will be built
in Mytish, Moscow, and its opening is scheduled for the summer
of 2008. Kemira Coatings has been exporting paints and coatings to
Russia for decades under the Tikkurila brand name. The company also
has local production in Russia, totaling six paint factories. These
products are sold under brands such as Finncolor and Teks. The
objective of the new logistics and customer service center is to
bring about a considerable improvement in Tikkurila's customer
services in the rapidly growing market in the Moscow area. The center
will also include facilities for comprehensive customer training,
which is an essential part of Kemira Coatings' marketing.
In August, Alcro-Beckers AB, part of Kemira's paints and coatings
business, announced its intention to sell its 50% stake in the
Swedish filler producer, Scanspac, to Gyproc AB, part of
Saint-Gobain. Spanspac's revenue in 2006 totaled approximately
SEK 241 million (EUR 26 million). Scanspac is the leading filler
producer in the Nordic area, with production units in Glanshammar and
Sala in Sweden. Since Alcro-Beckers AB focuses on paint
manufacturing, this divestment supports the unit's strategy. The
divestment was completed at the end of September.
Furthermore, Alcro-Beckers AB is building a new paint factory in
Nykvarn, south of Stockholm, in connection with the company's
logistics center. Production in the new factory was launched towards
the end of the year. Alcro-Beckers has been manufacturing paint in
the Lövholmen area in central Stockholm since 1902. It sold its
production facility in Stockholm city center last year and will
relocate its production operations to Nykvarn in early 2008.
OTHER OPERATIONS
Other operations include corporate expenses not charged to the
business areas, such as some research and development costs and the
costs of the Kemira Corporate Center. During the year, the Group has
particularly invested in harmonizing and enhancing its purchasing and
logistics processes, enterprise resource planning (ERP) system and IT
services. Development programs and investments of several million
euros are aimed at generating cost savings in the forthcoming years
as well as increasing the company's agility and flexibility in
responding to changes in the business environment.
Investments required for the ERP system will deviate from the
original plan and corrective actions are required and therefore a
write-down of EUR 15 million was carried out during the last quarter.
Other operations also include the water-soluble fertilizers unit,
which is not part of Kemira's core business operations. In February,
Kemira sold its shareholding (50%) in Kemira Arab Potash Company Ltd
(Kemapco), part of Water Soluble, to Arab Potash Company Ltd (APC).
In March, Kemira sold all of its shares in OnePoint Oy, a provider of
infrastructure and production support services in the Kokkola
Industrial Park, Finland, to Kokkolan Voima, in accordance with a
letter of intent signed in December 2006.
During the first quarter of the year, an error was identified and
reported in the calculation of the provision recognized in 2006 due
to the closure of the Water Soluble unit. This error was corrected
retrospectively in the last quarter figures of 2006 in accordance
with IAS 8. The provision was increased by EUR 8 million, decreasing
the result for the last quarter by the same amount. The tables
included in these financial statements provide more detailed
information on the correction of this error.
KEMIRA OYJ'S SHARES AND SHAREHOLDERS
On December 31, 2007, Kemira had 16,723 registered shareholders. Of
the shares, 17% (21%) were nominee-registered.
The volume of company shares traded on the OMX Nordic Exchange
Helsinki totaled 151.6 million at a total trading value of
EUR 2,492.9 million. Kemira Oyj shares registered a high of EUR 19.20
and a low of EUR 13.11, the share price averaging EUR 16.42. The
share closed at EUR 14.40, showing a 15% price decrease during the
year. On December 31, 2007, the company's market capitalization,
excluding treasury shares, totaled EUR 1,745 million (2,060).
On August 29, 2007, the State of Finland sold 40,097,420 Kemira Oyj
shares to Finnish investors. The sold shares represented 32.1% of
Kemira Oyj's shares. As a result of the transaction, the State of
Finland's shareholding and voting rights fell to 16.52%. The State of
Finland announced that the shares sold were divided between buyers as
follows:
- Oras Invest Oy 15.6%
- Jari, Jukka and Pekka Paasikivi 1.5% (0.5% each)
- Varma Mutual Pension Insurance Company 8.00%
- Ilmarinen Mutual Pension Insurance Company 3.60%
- Suomi Mutual Life Assurance Company 1.92%
- Sampo Life Insurance Company 1.45%.
After the transaction, Kemira's main shareholder is Oras Invest Oy
and its owners, members of the Paasikivi family.
During the financial year, a total of 77,389 new shares were
registered following subscriptions using warrants under the 2001
stock option program. Following the corresponding increase of share
capital, on the balance sheet date the company's share capital
totaled EUR 221.8 million and the number of registered shares
125,045,000. The 2001 stock option program ended in May 2007.
On December 31, 2007, Kemira held 3,854,465 million treasury shares,
representing 3.1% of all outstanding company shares. In February
2007, under the authorization by the Annual General Meeting, Kemira
transferred 144,143 treasury shares in its possession to persons
covered by the share bonus system for management. In 2007, a total of
18,938 of the shares transferred as part of this incentive plan
returned to the company due to terminations of employment, in
accordance with the plan's terms and conditions.
BOARD OF DIRECTORS AND AUDITORS
The Annual General Meeting on April 16, 2007 decided that the number
of members of the Board of Directors be seven. The AGM elected the
following Board members for 2007: Anssi Soila (Chairman), Eija
Malmivirta (Vice Chairman), Elizabeth Armstrong, Heikki Bergholm, Ove
Mattsson, Kaija Pehu-Lehtonen and Markku Tapio.
In an Extraordinary General Meeting held on October 4, 2007, a
decision was made to keep the number of Board members at seven. Pekka
Paasikivi was elected as the Chairman and new member of the Board of
Directors, and Juha Laaksonen as a new Board member. The current
members, Elizabeth Armstrong, Eija Malmivirta, Ove Mattsson, Kaija
Pehu-Lehtonen and Markku Tapio were elected to continue as Board
members until the end of their current terms.
The Board of Directors met 13 times during 2007.
The AGM elected Aulis Ranta-Muotio as Supervisory Board Chairman,
Mikko Elo as the first Vice Chairman and Heikki A. Ollila as the
second Vice Chairman, and the following Supervisory Board as members:
Pekka Kainulainen, Mikko Långström, Susanna Rahkonen, Risto Ranki and
Katri Sarlund.
The EGM of October 4, 2007 decided to dissolve the Supervisory Board.
The AGM elected KPMG Oy Ab, Authorized Public Accountants, as the
company's auditor, with Pekka Pajamo, Authorized Public Accountant,
acting as chief auditor.
AGM AND EGM DECISIONS
In accordance with the decision of the Annual General Meeting of
April 16, 2007, a dividend of EUR 0.48 per share was paid. Occurring
on April 26, 2007, the total dividend payout totaled
EUR 58.2 million.
The AGM decided that the Articles of Association be altered as
follows:
* Article 3 be removed, with respect to the minimum and
maximum share capital, the minimum and maximum number of shares and
voting rights conferred by Company shares;
* Article 4, with respect to the Company's shares being
included in the book-entry system, and Article 5, with respect to
the procedure governing the dividend record date, be removed;
* Article 7, with respect to the Supervisory Board members'
terms, be altered in such a way that a Supervisory Board member's
term span the period from his/her election until the end of the
next AGM, instead of one year;
* Article 10, with respect to the Supervisory Board's
duties, be altered in such a way that the Supervisory Board's duty
be to supervise the Company's administration for which the Board of
Directors and the Managing Director bear responsibility;
* Article 13 be altered in such a way that "to sign the
Company's business name" become "to have the right to represent the
Company";
* Article 15 be altered in such a way that the Company has
one auditor, who must be a firm of Authorized Public Accountants
and, additionally, the stipulation on the auditor's age limit be
removed from the said Article 15;
* A reference to the share purchase obligation pursuant to
Article 31 be removed from Article 17;
* Clause 2 of Article 18 be removed;
* The terminology of Article 20, with respect to the Annual
General Meeting, be specified as required by the new Limited
Liability Companies Act and the alterations of the Articles of
Association;
* Articles 21-36 be removed, with respect to share
redemption;
* Article 37 "In other respects, the regulations of the
Companies Act currently in force shall be observed" be removed.
The AGM authorized the Board to decide to issue a maximum of
12,500,000 new shares and/or transfer a maximum of 3,848,877 treasury
shares held by the company either against payment or, as part of the
implementation of the Company's share-based incentive plan, without
payment ("Share issue authorization"). The new shares may be issued
and the treasury shares may be transferred to the Company's
shareholders in proportion to their current shareholdings in the
Company, or through a private placement if the Company has
significant financial reasons for doing so, such as financing or
implementing mergers and acquisitions, developing its capital
structure, improving the liquidity of the Company's shares or if this
is justified for the purpose of implementing the Company's
share-based incentive plan. Furthermore, the private placement may be
carried out without payment only in connection with the
implementation of the Company's share-based incentive plan. The
subscription price of new shares and the amount payable for treasury
shares shall be recognized under unrestricted equity. The share issue
authorization will remain valid until the end of the next AGM. The
share issue authorization has not been used.
The AGM decided that a Nomination Committee be re-established in
order to enable Kemira to prepare proposals for Board member
candidates and Board emoluments, for the next AGM. The right to
appoint Nomination Committee members, representing Company
shareholders, will rest with the three largest shareholders who
account for the largest share of the votes conferred by all of the
Company's shares on November 1, preceding the AGM. In November 2007,
the following persons were elected to the Nomination Committee: Pekka
Timonen, Director General, Prime Minister's Office; Jari Paasikivi,
CEO, Oras Invest Oy; and Risto Murto, Senior Vice President, Chief
Investment Officer, Varma Mutual Pension Insurance Company. Pekka
Paasikivi, Kemira Oyj's Board Chairman, is acting as an expert member
of the Nomination Committee.
An Extraordinary General Meeting of Kemira Oyj was held on
October 4, 2007. The EGM elected members of the Board of Directors,
the number of whom remained at seven. Pekka Paasikivi was elected as
the Chairman and new Board member, and Juha Laaksonen was elected as
a new Board member. The current members, Elizabeth Armstrong, Eija
Malmivirta, Ove Mattsson, Kaija Pehu-Lehtonen and Markku Tapio will
continue as members of the Board of Directors until the expiry of
their current terms.
The EGM decided to dissolve the Supervisory Board and to amend the
Articles of Association as follows:
1. Articles 5 and 8 of the Articles of Association regarding
Supervisory Board were deleted; and
2. Articles 4, 7 and 18, items 3 and 7-10 of the Articles of
Association were amended so that references to the Supervisory Board
and its Chairman, Vice Chairmen and members were deleted.
At its constitutive meeting, the Board of Directors of Kemira Oyj
elected members from among the Board for the Audit Committee and the
Nomination and Compensation Committee. The Board's Audit Committee
members are Juha Laaksonen, Eija Malmivirta and Kaija Pehu-Lehtonen.
The Audit Committee is chaired by Juha Laaksonen. The Board's
Nomination and Compensation Committee members are Pekka Paasikivi,
Ove Mattsson and Markku Tapio. The Committee is chaired by Pekka
Paasikivi.
APPOINTMENTS IN KEMIRA MANAGEMENT
At the end of October, Kemira Oyj's Board of Directors appointed
Harri Kerminen, M.Sc. (Eng.), MBA, 56, as the new CEO of Kemira Oyj
as of January 1, 2008. Previously, Harri Kerminen was President of
Pulp&Paper, Kemira's largest business area.
With effect from the same date, Kemira's President and CEO, Lasse
Kurkilahti, became Senior Adviser to the Board of Kemira Oyj.
Mr. Kurkilahti will remain as Senior Adviser for the first quarter of
2008, after which his contract as President and CEO will come to an
end in line with a prior agreement.
Harri Kerminen has held his previous position as President of Kemira
Pulp&Paper since 2006. Prior to that, he was responsible for the
Kemira Specialty business. In his earlier career with Kemira, he has
acted as e.g. Vice President HR of Kemira Chemicals Oy, Manager of
the Oulu plants as well as working on various challenging production
site projects both in Finland and abroad.
In December, Jyrki Mäki-Kala, 46, was appointed President of Kemira
Pulp&Paper and member of Kemira's Management Board as of
January 1, 2008. Mr. Mäki-Kala is vacating his post as Vice
President, Finance & Control in Kemira Pulp&Paper business area,
prior to which he had occupied several international business
management positions in Kemira and in Finnish Chemicals. In his new
post, he will report to Kemira's CEO Harri Kerminen.
CHANGES IN THE GROUP STRUCTURE
During the financial year, a number of acquisitions and divestments
were made. These are covered in further detail under the sections
concerning the various business areas.
PARENT COMPANY'S FINANCIAL PERFORMANCE
The parent company posted revenue of EUR 279.7 million (266.1) and an
operating loss of EUR 22.3 million (operating loss EUR 53.1 million).
The parent company bears the cost of Group management and
administration as well as a portion of research costs.
Parent company's net financial expenses came to EUR 28.9 million
(+3.8). Net profit was EUR 2.7 million (2.6) and capital expenditure
totaled EUR 54.4 million (30.4), excluding investments in
subsidiaries.
DIVIDEND PROPOSAL
The Board of Directors will propose a per-share dividend of EUR 0.50
for 2007, corresponding to a dividend payout ratio of 95%. Excluding
non-recurring write-downs the payout ratio is 57%. For the financial
year 2006, Kemira paid out a dividend of EUR 0.48 per share.
According to the Board's proposal, the dividend record date is
March 26, 2008, and the payment date April 2, 2008.
STRATEGIC REVIEW AND FINANCIAL TARGETS
Towards the end of the year 2007, a strategic review was commenced in
Kemira Group. Based on that, Kemira is seeking to be a group of
global and leading chemical businesses with unique positions in
selected customer segments. Kemira aims at:
- High profitability: world-class efficiency and full
utilization of synergies
- Continuous growth: reinforcing current customer segments,
seizing new business opportunities and segments and strengthening
business in the emerging markets
- A performance driven culture, based on shared values,
which inspires growth and renewal.
In the framework of the strategic review, decisions have been made to
further develop and enhance expertise and business related to
chemical water treatment solutions. The basis of Kemira's water
treatment solutions lies in an efficient use of water in industrial
processes and in society. In order to attain its targets, Kemira will
align the operations of Kemira Pulp&Paper and Kemira Water to ensure
that all synergy benefits within and between those business areas
will be captured. Reflecting the special features of Kemira Coatings
business, Kemira has decided to emphasize its independent nature by
changing the steering structure to include a separate Board of
Directors with partly external members. Kemira Specialty will be
developed by maximization of profitability and cash flow.
The purpose of the strategy review is to enhance the Group's
profitability and to secure future growth, and the overall review
results will be ready during the first half of the year.
Kemira Group's objective is to continuously increase shareholder
value. The Group's financial targets include organic growth in sales
of more than 5%, operating profit of more than 10%, a positive net
cash flow after capital expenditure and dividends paid, and
continuous improvement in return on capital employed. Gearing comfort
zone is between 40-80%. Kemira's dividend policy aims at a payout of
40-60% of the Group's operative net profit.
OUTLOOK FOR 2008
Due to the uncertainty prevailing in the world economy and
particularly to the increase in prices of oil-based raw materials and
energy, at least first quarter profits will be challenging. Kemira
Group's growth is expected to continue moderately in 2008, chiefly
through organic growth. As a result of enhancing of production and
other operations, operating profit and earnings per share (excluding
non-recurring items) are estimated to grow from the 2007 level.
The revenue for Kemira Pulp&Paper and Kemira Water will change due to
internal change in customer segments between these business areas in
the beginning of 2008. The change will decrease Kemira Water's
revenue for 2007 by around EUR 44 million, increase Kemira
Pulp&Paper's revenue by around EUR 25 million and decrease
eliminations between these businesses by around EUR 19 million. This
change will not have a significant effect on the operating profit of
the businesses. Kemira Pulp&Paper's and Kemira Water's combined
revenue is estimated to grow from the 2007 level.
Global demand from Kemira Pulp&Paper's customer industries are
estimated to remain good. Restructuring of customer industries'
operations in North America and Europe will affect Kemira
Pulp&Paper's growth and will put pressure on 2008 result and is
requiring counter measures to improve the profitability. Generation
of growth for the business area is projected to come principally from
the emerging markets, including the first year of operation of the
pulp chemical plant in Uruguay. Kemira Water is expected to have a
good organic growth. During 2008, Kemira Water will focus on the
integration of acquirees, new product development and profitability
improvement. In Kemira Specialty the demand for titanium dioxide,
organic acids and sodium percarbonate is expected to be good. The
average sales price in euros for titanium dioxide is not expected to
rise significantly yet during the first half of the year, despite of
some implemented price increases in dollar markets. The demand for
Kemira Coatings' products are estimated to remain at a good level in
most market areas, with the strongest growth anticipated in Russia
and other CIS countries.
Helsinki, February 6, 2008
Board of Directors
All forward-looking statements in this review are based on the
management's current expectations and beliefs about future events,
and actual results may differ materially from the expectations and
beliefs such statements contain.
For further information, please contact:
Kemira Oyj
Timo Leppä, Executive Vice President, Group Communications
Tel. +358 10 862 1700
Kemira Oyj
Andreas Langhoff, Investor Relations Manager
Tel. +358 10 862 1140
Kemira will hold a press conference on its 2007 results for the media
and analysts at its head office (Porkkalankatu 3) today, starting at
11:00 a.m.
Presentation material is available on our website
http://www.kemira.com/Group/English/Investors/Presentations/Result_presentations/.
This announcement is continuing in part II/II
